Cost of Construction (CoC) of a building

When you plan to construct a house, one question that always plagues you is “what will be the cost of constructing it?”

Whenever you meet someone from the trade – any architect, contractor or a builder and, perhaps, even when you meet a broker or your chartered accountant - you will ask him the same question.

But you end up as confused as you started with if not more with the plethora of figures that you get. So, it seems that to get the answer, you have to actually spend the money and calculate the number for yourself.

Why is it so difficult to get a good cost estimate?

The answer lies in the way the industry is structured and the limited information that any one person possesses.

First of all, the cost is quoted most often in “per square feet of built up area” basis. So, the most common type of answer that you get is that it would cost approximately INR 1900 - 2000 per sq ft to do the construction.

The ambiguity creeps in because this rate is a “derived” number. It is calculated by adding up all the costs associated with a building and dividing it with the area constructed.

Key points that contribute to the ambiguity are –

(i) What AREA are we talking of? Is it the carpet area, super built up area (a term builders use to show more area delivered that what a person actually uses), contracted out area (typically civil contractors charge for 50% of the cost for the areas under balconies and for terraces and thus the contracted out area is not equivalent to any other area that we come across) or is it an area defined in some other manner? How are basements, open terraces, driveways, open courtyards and open shafts to be treated when calculating this area to be kept in the denominator?

(ii) What is the quality of work and the finish that is expected? Quality in any case is a subjective field. Someone might compromise on the workmanship to save some money or because of lack of knowledge or supervision while for someone else no compromise is acceptable. Materials used and the finish expected can vary very significantly in the calculations. For instance, the structural steel that is used in framed structures comprise of approximately 10-20% of the total cost of constructing a house. The steel costs across different brands such as TATA Steel, Rathi, Kamdhenu, L&T and others could have a price variation of as much as 35-45%. Even the use of steel in structure based on the assessment of different structural engineers can vary by 30-50% depending on the assumptions and the factor of safety that the engineer assumes. The numbers can vary much more significantly when we look at various finishing items such as Toilet seats, Bathroom tiles, Flooring options, Façade treatment, Doors and Windows and other woodwork. These can be so difficult to estimate without getting into the details of what is required to be made.

So, the way to go about doing the estimates is to get into a detailed working of your requirements, draw up a “Bill of Quantities (BOQ)” (which is a detailed estimate of items to be used in the building), assess the budgets and preferences of finishes to be used, get broad estimates of the material from the market and then calculate the costs to arrive at a reasonable budget.

However, since this exercise needs good planning and involvement of some professionals (contractors or architects), perhaps you will have to rely on thumb rule numbers (such as INR 1500 per sq ft) for taking the plunge of starting your construction.